New Language for Both ITAR and EAR-Controlled Goods

Focusing on the Mandated Export Shipping Documents

The U.S. Commerce Department’s Bureau of Industry and Security (BIS) and the State Department’s Directorate of Defense Trade Controls (DDTC) have revised the standardized language for the destination control statement (DCS) that exporters are required to put on their shipping documents. This will effectively harmonize the export destination control statements mandated by the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR).

Here’s what it means. 

Harmonizing the Mandated Export Destination Control Statements (DCSs)

It is a legal statement required by the EAR and the ITAR stating that the goods you are exporting are destined to the country indicated in all the shipping documents. It is a necessary formal legal procedure that makes clear what happens to shipments, and it states that the buyer isn’t going to take the goods and forward them to another country. In a nutshell, destination control statements are required to alert recipients of ITAR or EAR-controlled items of associated U.S. export control requirements. 

In the past, you had to put statements on most shipping documents — everything from ocean bills of lading to airway bills. Now you are only required to put the standardized language on the commercial invoice. The intent is to streamline the export clearance requirements, most notably, for shipments containing both EAR and ITAR items.

Note, the new ITAR regulations also require that this new statement, or a reference to this statement, be included within licensing, manufacturing and distribution agreements.

While it’s not mandatory for all transactions, including a Destination Control Statement on every transaction is a good measure to take in order to protect yourself (and give peace of mind) in the event that merchandise you sell to a buyer is unexpectedly re-exported, re-licensed or re-transferred elsewhere.

It is used to alert parties outside the United States that the items are subject to U.S. export control measures.

Speculative Example of What Could Be Construed as a Problem Issue

Let’s say you are shipping a controlled product to the UAE with the understanding that the buyer will not forward the goods elsewhere after he or she receives the shipment. Later, you discover that the buyer does, in fact, forward the goods to Iran whereby they don’t have any trade barriers between their respective countries. Technically, with or without your knowledge, you are breaking the law. To avoid this problem situation, it’s best to at the very least to include the following statement on your commercial invoice:

“These items are controlled by the US government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s) either in their original form or after being incorporated into other items, without first obtaining approval from the US government or as otherwise authorized by US law and regulations.” (Source: http://www.natlawreview.com/article/departments-commerce-and-state-harmonize-export-destination-control-statements-under.)

What’s Critical Here

The more you know, the better off you will be. Take these steps to ensure a successful export transaction:

  1. Know your customer (trust is critical).
  2. Do your homework on the market and lay of the land.
  3. Familiarize yourself with the rules and regulations of the importing country.
  4. Find out in advance what penalties you will face should you unknowingly break the law.
  5. Check in with the U.S. Commerce Department’s Bureau of Industry and Security (BIS).

Since the new rules will take effect Nov. 15, 2016, U.S. exporters should begin taking steps now to update their enterprise resource planning (business process management software) systems to reflect the new destination control statement language and the additional export classification information that may be required to be printed on their commercial invoices in order to avoid unnecessary delays with shipments later in the year.

Lastly, when you revise the standardized language on the commercial invoice, remember to also confirm your manuals, contract language (for example, licensing, manufacturing and distribution agreements) and any training modules.

Federal Register: Revisions to the Export Administration Regulations (EAR): Harmonization of the Destination Control Statements (full printed PDF version for download can be found on the right sidebar).